Question 1

To calculate straight line depreciation, use the following formula:
? $$\text { Annual Depreciation } = \frac { \text { Total Depreciation } } { \text { Estimated Useful Life (Years) } }$$ ?

Accepted Answer

The formula for calculating straight line depreciation divides the total depreciation (cost of the asset minus its salvage value) by the asset's estimated useful life in years, giving the annual depreciation expense.

Question 2

The salvage value of an asset is what the asset is worth at the time it is taken out of service.​

Accepted Answer

The salvage value of an asset is indeed the estimated residual value of an asset at the end of its useful life, or what it is worth when it is taken out of service.

Question 3

Depreciation method that assumes an asset depreciates more in the early years of its useful life than in the later years is called double declining balance depreciation.​

Accepted Answer

The answer of Depreciation method that assumes an asset depreciates...

Question 4

To calculate the depreciation using the units of production method, calculate the useful life in units of production rather than units of time.​

Accepted Answer

The units of production method of depreciation calculates the expense based on the actual output or usage of the asset, rather than the passage of time, focusing on the asset's productivity rather than its age.

Question 5

​The ACRS was a 1986 modification of the property classes and the depreciation rates for accelerated depreciation method; used for assets purchased after 1986 to assist businesses in using depreciation as a tax write-off.

Accepted Answer

The ACRS (Accelerated Cost Recovery System) was introduced in 1981, not 1986. The modification made in 1986 is known as the Modified Accelerated Cost Recovery System (MACRS), which replaced ACRS for assets placed in service after 1986.

Question 6

An IRS prescribed percentage that is multiplied by the original basis of an asset to determine the depreciation deduction for a given year. Based on property class and the life of the asset.​

Accepted Answer

The IRS prescribes depreciation percentages based on the property class and the life of the asset, which are used to calculate the depreciation deduction for a given year. This is part of the Modified Accelerated Cost Recovery System (MACRS), which is the current method of depreciation for most tangible property placed in service after 1986.

Question 7

To calculate the declining balance depreciation use the following formula:
? $$\text { Declining Balance Rate } = \frac { 1 } { \text { Useful Life } } \times \text { Multiple }$$ Then multiply the declining balance rate by the current value of the asset.

Accepted Answer

The formula for the declining balance rate is indeed $\frac{1}{\text{Useful Life}} \times \text{Multiple}$, and to calculate depreciation, you multiply this rate by the current value of the asset.

Question 8

The double declining balance method takes the straight-line method and divides by 2.

Accepted Answer

The double declining balance method accelerates depreciation by doubling the straight-line depreciation rate, not by dividing the straight-line method by 2.

Question 9

​Salt Water Taffy Co. purchased pulling equipment for $40,000. The equipment has a useful life of 5 years and salvage value of $10,000. Using the sum of the digits method, the depreciation deduction for the first year is $10,000.
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Accepted Answer

The sum of the digits method calculates depreciation based on the sum of the digits of the asset's useful life. For a 5-year asset, the sum of the digits is 15 (5 + 4 + 3 + 2 + 1). The depreciation deduction for the first year is calculated as (15/15) * ($40,000 - $10,000) = $10,000.

Question 10

The length of time an asset is expected to generate revenue is called terminal life.

Accepted Answer

The length of time an asset is expected to generate revenue is called its useful life, not terminal life. Terminal life typically refers to the end phase of an asset's life or the period at the end of its useful life.

Question 11

Straight-line depreciation is the most widely used method of calculating depreciation in business today.​

Accepted Answer

The answer of Straight-line depreciation is the most widely used...

Quiz 17: Depreciation

To calculate straight line depreciation, use the following formula: ? $\text { Annual Depreciation } = \frac { \text { Total Depreciation } } { \text { Estimated Useful Life (Years) } }$ ?

The salvage value of an asset is what the asset is worth at the time it is taken out of service.

Depreciation method that assumes an asset depreciates more in the early years of its useful life than in the later years is called double declining balance depreciation.

To calculate the depreciation using the units of production method, calculate the useful life in units of production rather than units of time.

The ACRS was a 1986 modification of the property classes and the depreciation rates for accelerated depreciation method; used for assets purchased after 1986 to assist businesses in using depreciation as a tax write-off.

An IRS prescribed percentage that is multiplied by the original basis of an asset to determine the depreciation deduction for a given year. Based on property class and the life of the asset.

To calculate the declining balance depreciation use the following formula: ? $\text { Declining Balance Rate } = \frac { 1 } { \text { Useful Life } } \times \text { Multiple }$ Then multiply the declining balance rate by the current value of the asset.

The double declining balance method takes the straight-line method and divides by 2.

Salt Water Taffy Co. purchased pulling equipment for $40,000. The equipment has a useful life of 5 years and salvage value of $10,000. Using the sum of the digits method, the depreciation deduction for the first year is $10,000.

The length of time an asset is expected to generate revenue is called terminal life.

Straight-line depreciation is the most widely used method of calculating depreciation in business today.

Quiz 17: Depreciation

The salvage value of an asset is what the asset is worth at the time it is taken out of service.​

Depreciation method that assumes an asset depreciates more in the early years of its useful life than in the later years is called double declining balance depreciation.​

To calculate the depreciation using the units of production method, calculate the useful life in units of production rather than units of time.​

​The ACRS was a 1986 modification of the property classes and the depreciation rates for accelerated depreciation method; used for assets purchased after 1986 to assist businesses in using depreciation as a tax write-off.

An IRS prescribed percentage that is multiplied by the original basis of an asset to determine the depreciation deduction for a given year. Based on property class and the life of the asset.​

The double declining balance method takes the straight-line method and divides by 2.

​Salt Water Taffy Co. purchased pulling equipment for $40,000. The equipment has a useful life of 5 years and salvage value of $10,000. Using the sum of the digits method, the depreciation deduction for the first year is $10,000. ​ ​

The length of time an asset is expected to generate revenue is called terminal life.

Straight-line depreciation is the most widely used method of calculating depreciation in business today.​

The salvage value of an asset is what the asset is worth at the time it is taken out of service.

Depreciation method that assumes an asset depreciates more in the early years of its useful life than in the later years is called double declining balance depreciation.

To calculate the depreciation using the units of production method, calculate the useful life in units of production rather than units of time.

The ACRS was a 1986 modification of the property classes and the depreciation rates for accelerated depreciation method; used for assets purchased after 1986 to assist businesses in using depreciation as a tax write-off.

An IRS prescribed percentage that is multiplied by the original basis of an asset to determine the depreciation deduction for a given year. Based on property class and the life of the asset.

Salt Water Taffy Co. purchased pulling equipment for $40,000. The equipment has a useful life of 5 years and salvage value of $10,000. Using the sum of the digits method, the depreciation deduction for the first year is $10,000.

Straight-line depreciation is the most widely used method of calculating depreciation in business today.